Transit service contracting for laymen (Part 2): Service contracting

Last week we laid out the existing “traditional system” of how transit services are provided by government.  Comes now the proposal by upbeat and progressive sectors for “service contracting,” something which is actually not new as it has been the system that is in place in many more advanced countries in the world.  In our neighborhood, we have Japan, Hong Kong, Singapore, Korea, to name a few.

How does it work? First, instead of simply regulating, the government directly contracts out the “services” needed to transport a certain number of people on a particular route per day, with very detailed specifications tailored to the demand.  For example: a) vehicles must carry a maximum number of passengers comfortably, no overloading; b) must be able to board passengers within “x” minutes after they arrive at a “station;” c) must provide enough  vehicles to avoid overcrowding at stations; d) must schedule frequency (every 5, 10, 15, 20 minutes) and ensure vehicles run on time; e) must meet other specifications to provide comfort, etc.

The government directly contracts out a service for its constituents, designed to meet their needs – especially how many trips are expected each day, and when are these trips made.  The service is specific to demand – the bulk of the trips are home-to-work trips and these are made within a 2 hours peak in the morning and about 2-3-hour peak in the evening; the rest of the day are non-peak with a slight uptick at lunch.  Service providers have to schedule their service frequency accordingly and optimize costs and revenues.  Minimum performance standards and specifications (MPSS) are provided in the procurement and the government bid for the minimum overall contract costs.

The other very distinct and dissimilar change is that fare-setting and collection are done by the government, through an automated fare collection system (AFCS). Thus, the service providers focus only on service delivery, meeting the MPSS, and bid for their minimum costs.  The MPSS are regularly checked and measured, with pre-agreed penalties (including termination, if needed), and oftentimes with bonuses for excellent performance as well.  This will ensure that the best service is provided to the commuters and will encouraged service providers to even upgrade and excel in their services.  The fact that the revenue collection is separated from the service provision will allow incentives for better services.  External factors such as fuel price increases can be addressed with pre-set agreed adjustments based on contractual provisions which are part of the procurement bidding process.

The end result of this is better public transportation services: sufficient capacity can be scheduled on regular frequencies (Example: “Next bus arrives in 3 minutes”); there will be no overloading and fighting for space, there won’t be transport strikes every time there are fuel price increases, drivers don’t race against each other so safety is greatly enhanced.  Personnel and operations are professionalized, and you get an overall better public service and public transportation than what we had before.  Most advanced countries do this, our more advanced neighbors, too.  There is really no reason why we shouldn’t.  (To be continued)